Which Method of Preparing the Operating Activities Section of a Statement

question 149

Multiple Choice

Which method of preparing the Operating Activities section of a statement of cash flows adjusts net income to remove the effects of deferrals and accruals for revenues and expenses?

• A)The direct method
• B)The indirect method
• C)Both the direct and indirect methods
• D)Neither the direct method nor the indirect method

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Definitions:

Expected Constant Growth Rate

The steady rate at which a company’s dividends or earnings are anticipated to grow indefinitely.

Intrinsic Value

An estimate of the true value of an asset, including tangibles and intangibles, based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

Beta Coefficient

An index of a security's fluctuation in value as compared to the broader market, signifying its relative risk versus the average market risk.

Characteristic Line

In finance, a line that describes the relationship between the returns on a stock and the returns on the market, used in the Capital Asset Pricing Model (CAPM).